Advanced Trading Strategies

Abstract

As we have seen so far, mathematics empowered with Mathematical®can be used as a framework for answering many practical questions in the market analysis, investing, and trading of stocks and options. Chapter 5 and 6 present some sophisticated ways as to how to analyze the market from the point of view of estimating the perceived stock volatilities. In Chapter 7 it was shown how mathematics and Mathematical® can be used for synthesizing the available information about market dynamics, market uncertainty, and an investor’s attitude towards uncertainty with respect to explicit trading and investment diversification decisions, provided that the market dynamics is simple enough.

“... the portfolio-selection process needs to be purged of its reliance on ‘static’ optimization techniques, which are incapable, by their very nature, of evaluating intertemporal tradeoffs. A fully satisfactory method of portfolio selection must come to grips with the large nonlinear systems of multivariate partial differential equations of dynamic optimality...”

(Robert C. Merton, I.E. Block Community Lecture at the meeting of Society for Industrial and Applied Mathematics in Toronto in July 1998).